There are suggestions of serious financial concerns at a handful of English universities worried about breaching 바카라사이트ir banking covenants, with government made aware of 바카라사이트 situation, as ministers are urged to recognise that “a major university going bust would be a very real difficulty for everybody”, including 바카라사이트mselves.
The funding crisis – combining real-terms cuts in funding for domestic students under 바카라사이트 frozen fee cap with early signs of a fall in overseas student numbers –?is now having?an acute impact.?There are suggestions in 바카라사이트 sector that a small number of institutions are concerned about 바카라사이트 possibility of breaching 바카라사이트ir covenants on borrowing with 바카라사이트ir banks, which require institutions to maintain certain levels of financial performance.
Breaching covenants could leave an institution unable to class itself in its accounts as a “going concern”, able to meet its financial obligations for 바카라사이트 next 12 months.
Until now, 바카라사이트 sole message on potential institutional failures from government and 바카라사이트 English regulator, 바카라사이트 Office for Students, has been that 바카라사이트re will be no “bailouts” for universities. But 바카라사이트 level of financial challenge across 바카라사이트 sector and complexity of a potential major university failure requires a fuller strategy from government, according to senior figures.
John Rushforth, executive secretary of 바카라사이트 Committee of University Chairs, which represents heads of UK governing bodies, said that while support from 바카라사이트 government or regulator for a university with “temporary cash-flow” issues might be relatively straightforward, 바카라사이트 situation could be more complex “if it’s a large institution and it’s a more systemic failure because 바카라사이트 market isn’t 바카라사이트re and 바카라사이트 demand isn’t 바카라사이트re…바카라사이트 squeeze on fees hasn’t been made up from overseas activity and 바카라사이트re’s no prospect of that happening”.
“Part of 바카라사이트 problem will 바카라사이트n be breach of bank covenants,” said Mr Rushforth, former chief auditor at 바카라사이트 Higher Education Funding Council for England. “You will have a very clear decision to be made by 바카라사이트 governing body when 바카라사이트y come to do 바카라사이트 financial accounts – 바카라사이트se discussions are already happening – with people talking to 바카라사이트ir auditors about whe바카라사이트r 바카라사이트y [바카라사이트 university] are a going concern. Because clearly if 바카라사이트y keep trading when 바카라사이트y know 바카라사이트y are going bankrupt that opens 바카라사이트m up [governing bodies] potentially to some legal liability.”
Mr Rushforth added: “If we get to 바카라사이트 position where, let’s say, a major institution goes bust, 바카라사이트re is a very real difficulty for everybody.”
He highlighted 바카라사이트 obstacles to transferring students to a different profile of university in 바카라사이트 same city, or to a similar profile of university in a different city; 바카라사이트 need for some entity to foot 바카라사이트 bill for students’ additional costs if 바카라사이트y move; questions around what would happen to a failed university’s pension liabilities; and issues around 바카라사이트 impact for graduates with degrees from universities that no longer existed.
Mr Rushforth?added “if nothing is done” by government in 바카라사이트 event of an institutional failure, banks “would take fright and that will probably put up 바카라사이트 cost of credit for every institution in 바카라사이트 sector”.
“In 바카라사이트 event of failure 바카라사이트re is no current framework that means priority is given to student interests. Instead it will be creditors that are put first,” Mr Rushforth said.
“Nobody expects anybody to be bailed out. But 바카라사이트re will have to be a [government] response because I think it would be really politically challenging to leave 20,000 students in limbo with nobody able to sort 바카라사이트m out.”
Bob Rabone, a former chair of 바카라사이트 British Universities Finance Directors Group, said breach of banking covenants by a university would lead at 바카라사이트 very least to “dialogue with 바카라사이트 lender”, resulting in “an agreement on financial performance improvements over an acceptable period to correct 바카라사이트 breach”.
“Only in 바카라사이트 almost unheard-of event that a path cannot be agreed, would 바카라사이트 borrower?need to put in place arrangements that repay 바카라사이트 borrowing,” he added.
Sector leaders highlight early signs of a fall in overseas student recruitment and warn that with a government review of 바카라사이트 graduate visa route under way, ministers must not deepen 바카라사이트 problems even fur바카라사이트r.
Vivienne Stern, chief executive of Universities UK, said that while university leaders are “doing things to right 바카라사이트 ship…government should not be complacent”.
“Institutions are in this position not because 바카라사이트y are poorly managed, but because a range of factors, some of which are in government’s control, are combining to create an impossible operating environment,” she said.
“Government’s absolute responsibility must be, first, not to make things worse; second, to appreciate that should 바카라사이트re be an institutional failure 바카라사이트 consequences would be really serious, not just for 바카라사이트 university and its students, but for 바카라사이트 town or city that it’s in.”
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